Written Evidence from the Department for Education and the Education Funding Agency

Question 75-80 (Meg Hillier): The cost of offices of the Regional School Commissioners

The first year set up and running costs of the Regional Schools Commissioners (RSCs) and their offices are estimated to be approximately £4.5million. This is not new additional funding but will be met from within the Department for Education’s existing budget envelope.

The set up costs for the RSCs include: refurbishment of premises, recruitment of the RSCs and election of the head teacher boards.

The running costs include: release time for the head teacher board members, staff costs for Commissioners and their offices, travel and other admin costs.

Set up Costs:

Refurbishment of Premises (first year 2014-15).

Four of the eight RSC teams were set up in existing DfE HQ buildings at Sheffield, Coventry, Manchester and Darlington and no additional costs have been incurred apart from minor elements such as RSC signage.

The refurbishment costs for the remaining four are approximately:

RSC Recruitment costs including temp staff, recruitment consultants and training consultants and vacancy advert cost are approximately- £166,300.

A Headteacher Board election cost was approximately £21,000.

First Year Running Costs:

The first year running costs represent part of the year (July 2014 – March 2015). The Department has committed to meeting the first year set up and running costs from its existing budget envelope.

Running Costs (July 2014 - March 2015)

We have not yet determined the budget for RSCs for 2015-16.

Question 129-132 (Mrs McGuire):  The rules on related party transactions which apply to charities.

The Charity Commission publishes clear information on the rules for paying charity trustees. These rules to do not prohibit trustees from being paid for services they deliver to their charity. In its document “Trustee expenses and payments” the Commission explains, on pages 12 and 13, that:

Trustees can be paid for providing services (and, in some cases, goods) to the charities for which they are trustees. The power to do this and the conditions which trustee boards must follow in deciding when payment is appropriate are set out in the Charities Act.

The decision to do this must be made by those trustees who will not benefit. They must decide that the service is required by the charity and agree it is in the charity’s best interests to make the payment and must comply with certain other conditions.

Examples of services that may be provided by a trustee in return for payment under the power in the Charities Act include:

• the delivery of a lecture;
• a piece of research work;
• the use of a trustee’s firm for a building job;
• the occasional use of a trustee’s premises or facilities….
• providing specialist services such as estate agents, land agents, management and design consultants, computer consultants, builders, electricians, translators and graphic designers.

The guidance is published at the following link:  https://www.gov.uk/government/publications/trustee-expenses-and-payments-cc11

The Commission provides a summary of the rules for paying trustees here: https://www.gov.uk/payments-to-charity-trustees-what-the-rules-are.

The Department has rigorous policies in place for academy trusts that go beyond basic charity requirements.  This means that academy trustees and other connected parties who supply goods and services to their trust must generally charge no more than ‘cost’, and trusts must publish the relevant business and pecuniary interests of their trustees on their website. 

Question 153-155 (Chair): The awarding of sponsorship of Dorothy Barley Junior School to the REAch2 academy chain.

In October 2013 the Secretary of State’s statutory intervention powers were used to issue an Academy Order and appoint an Interim Executive Board (IEB) at Dorothy Barley Junior School in Barking and Dagenham. The department put forward REAch2 as the proposed sponsor. As part of the IEB’s consultation on academy conversion, officials met the Rt Hon Margaret Hodge MP to discuss the sponsorship proposal. Following this meeting Mrs Hodge wrote to Lord Nash (Parliamentary Under Secretary of State for Schools) raising concerns about REAch2 and suggesting an alternative sponsor. Lord Nash responded to these concerns at the time and set out the reasons why REAch2 was considered the most suitable option. The two letters are reproduced below.

The Chief Executive of REAch2 was previously the Headteacher at Pooles Park Primary School in Islington and resigned this position in December 2002. He was not sacked as stated in Q154. He subsequently became the Headteacher at Hillyfield Primary School in Waltham Forest which has been judged outstanding by Ofsted since 2006.

There are currently 35 academies in the REAch2 Trust with five further schools set to open in September 2015. REAch2 are a primary only sponsor and report that for 2014 results across the Trust have improved by an average of 11% at the end of Key Stage 2 compared to 2013. For schools which joined REAch2 as sponsored academies in the 2013-14 academic year this figure was 20%. In addition, 96% of sponsored academies in the Trust are above the Key Stage 2 floor standard, compared to only 15% before joining REAch2.

Letter from the Rt Hon Margaret Hodge MP to Lord Nash, Parliamentary Under Secretary of State for Schools (16 December 2013).

Dear Lord Nash,

Dorothy Barley Junior School

I recently met with one of your officials to discuss the future of Dorothy Barley Junior School which is in my constituency. My meeting followed an announcement made by Dorothy Barley’s Interim Executive Board that your department had asked REAch 2 to take forward proposals for running the school as an academy.

I have real concerns about REAch 2. When I met the Chief Executive Steve Lancashire he claimed to have had two headships in Islington (a borough I know well.) When I asked him to name the schools he was unable to do so. You have given REAch 2 32 schools to run and manage in just 2 years. I do not see the sense in overloading this organisation, however well you regard their performance with other schools. The nearest school to Dorothy Barley is an hour’s journey by public transport according to Google maps. These journey times mean that oversight at Dorothy Barley will be less frequent and rigorous and the children of Dorothy Barley deserve better. I would therefore like to ask that you consider Barking & Dagenham Partnership Learning Trust, led by Executive Principle Roger Leighton, as a sponsor for the new school. They work in the Borough and know this school.

The Trust has already successfully bid for and set up Riverside School which is a brand new free School in Barking. This is one of three schools operating under its umbrella all of which are Outstanding according to Ofsted.

The Trust wishes to develop still further adding Dorothy Barley Junior to its stable would give the School the chance to have the first class locally-provided leadership that the Trust can provide.

I would be grateful if you would consider this and let me know what you intend to do.

Yours sincerely

Margaret Hodge MP

Letter from Lord Nash, Parliamentary Under Secretary of State for Schools to Rt Hon Margaret Hodge MP (21 January 2014).

Dear Margaret

Thank you for your letter of 16 December 2013 about Dorothy Barley Junior School.

As you say, the department has put forward REAch2 as our proposed sponsor should Dorothy Barley Junior School convert to become an academy. REAch2 is an approved sponsor and we are confident they have the experience and expertise to bring about the required transformation at Dorothy Barley Junior School. 

I agree that the pupils at Dorothy Barley Junior School deserve the very best standard of education, and note your concerns about REAch2. There are currently 24 open academies in the REAch2 Trust, and seven schools have been approved to join the Trust by September 2015. I agree that REAch2’s growth has been swift, but I am convinced they have the capacity and capability to support this growth. Steve Lancashire, the CEO of REAch2, is a National Leader of Education and has been a headteacher for more than 20 years. He is supported by two equally experienced National Leaders of Education with a proven track record of rapidly transforming schools in special measures. Each of REAch2’s multi-academy trusts is led by an Executive Principal and REAch2 employs outstanding teacher mentors who can be deployed in schools as needed. In addition to educational expertise, REAch2 also includes: a full-time business and finance director, head of finance, head of HR, procurement manager and project managers to oversee the conversion of schools to academy status.

Please be assured that the journey time between Dorothy Barley Junior School and the nearest REAch2 academy will not affect the level of oversight at the school. Indeed, should Dorothy Barley Junior School join REAch2, more rigorous governance arrangements will be established. The school would have its own local governing body that would report to a regional board, who themselves will be held to account by REAch2’s strategic board of directors and members. 

With regard to the Partnership Learning Trust, I am aware of the Trust’s success in establishing Riverside School and recognise that the three founding schools have been judged outstanding by Ofsted. We are, however, unable to consider the Trust as an academy sponsor as the department’s policy is that schools becoming sponsors should be academies themselves. It is expected that the sponsor and the sponsored academies would be part of the same trust. In addition, academy trusts are required to be directly accountable to the Secretary of State and the articles of association for academy trusts stipulate that local authority associated persons should not exceed 19.9% of the members of an academy trust. The headteacher of a local-authority-maintained school would be considered a local-authority-associated person, and as such the members of the Partnership Learning Trust currently exceed this maximum.

You will know that the consultation on whether Dorothy Barley Junior School should become a sponsored academy ended on 20 December. The Secretary of State will carefully consider all representations received and other relevant factors before taking a final decision on the future of the school. We expect to inform the school of the decision before the end of January.

Thank you for writing on this important matter.

Yours sincerely,

John Nash 

Question 164-5, 172 & 185-7 (Mr Bacon):   Details of the 18 academy chains which are not at present permitted to expand further.

The list of paused academy chains is subject to change due to the fact we regularly review chain performance and act when there is new information which may affect the capacity of a chain.  Therefore, the number of formally paused sponsors is now 17.  The Academy Transformation Trust (ATT), which runs 16 schools, is no longer paused. 

The following 17 sponsors at 20 November 2014 remain formally paused and have responsibility for a total of 163 academies with 93,872 pupils.  AET and E-ACT are responsible for 101 schools (61% of the total schools with paused sponsors) and 54,838 pupils (58% of the total pupils with paused sponsors).  Table 1 summarises the current position.  Table 2 provides school level detail for each paused sponsor.

Table 1 - Summary of the position for paused sponsors at 20 November 2014

Table 2 – Details of position for paused sponsors at school level

Question 191-192 (Meg Hillier):  Is the value of land considered when making decisions about whether or not a school should become an academy

The decision on whether or not schools should transfer to academy status is one for the individual school.  The value of land held by or occupied by individual schools is not considered by the Department at the point the school becomes an academy and is not relevant to the department's decision whether to approve the conversion.

We do consider current ownership of school land, and the methods by which the land will be made available to the academy, but the actual value of land is only considered should that land subsequently come to be disposed.

Schools sit on a variety of different types of land, which are treated in different ways on conversion to academy status. Most commonly, schools will occupy “public land”, which at some point was previously provided by the local authority. This land will either still be in the authority’s ownership, or else will at some point in the school’s history have transferred to the governing body, or to a charitable trust (foundation). Local authority land which has passed to a governing body or charitable trust remains public land.

This land may then be transferred to the academy trust, on a freehold basis, or may remain with or return to the local authority and be leased to the academy. However, even after transfer and the school becoming an academy, the land remains public land, and transfers are at nil value.

Under legislation, public land cannot be disposed of without the freeholder of the land seeking Secretary of State’s consent, and the mechanisms for seeking that consent set out in legislation give the Secretary of State powers to refuse, and instead ensure the land stays in education use by transferring it to another school at nil value. Should consent to dispose be given, the Secretary of State also has powers to direct that proceeds from the sale are repaid, either to the Secretary of State – who could potentially use it to fund a new site for another school - or the local authority who may do likewise if there is local need. So the value of the land is protected and can be recovered, and potentially deployed for other sites or other educational uses.

Schools may also sit on private land owned by charitable foundations. This is most common in the case of church schools who will usually occupy diocesan land. Again the Department will ensure land is made available to the academy by appropriate means, but the value of the land is only considered at the point of disposal. If trustees are to dispose of private land, they must consider whether it has received funding which would act to make it “publicly funded” land as defined under the Education Acts. Normally this would be where the Secretary of State has served a notice that accepting grant funding from the Department will change the status of the land in this way. If land has been “publicly funded”, then it is treated in a similar way to public land in that Secretary of State consent is required for disposal, and legislation gives the Secretary of State the power to recover the public investment, or where the public investment is particularly significant, ensure the land remains in education use by transferring it to another school and repaying trustees for the value of their interest in the land.

Where the Department provides a site for a new academy or free school directly, usually by a transfer of the freehold to the academy trust, that land is also public land, and falls under the same restrictions on disposal, meaning disposal is protected and the Secretary of State can potentially recover the value or ensure it remains in education use.

Education legislation also contains mechanisms to make use of surplus education land. For example, local authorities have certain powers over public land at foundation and voluntary schools. Where a local authority is satisfied that the land held for a school is not needed for that school, and they feel it is needed for another school, they may apply to the Schools Adjudicator for a transfer Order so that the land can be used for the new school. They must inform the Secretary of State of this request, and the Secretary of State can either allow the authority to claim the land for a school of their choice, or can instead transfer the land herself to an academy.

The Secretary of State also has powers over land held by a local authority which has been used for a school at any point in the last 8 years. If the land is required for a new academy, the Secretary of State can make a scheme transferring the authority’s land to the new school. The Department has considered the use of these powers in relation to acquiring sites for new free schools from authorities.

Finally, the Department has sought views on a draft clause for the model funding agreement which will apply to new academy trusts (or new academies opening with an existing academy trust). The proposed clause will require the Secretary of State to consult with an academy trust where a basic need or parental desire for additional places is identified in an area where an academy is situated and in circumstances where the Secretary of State considers that not all of the land is needed for the academy at its planned capacity. Free school funding agreements already include a clause which allows the Secretary of State, in certain circumstances, to use a free school’s spare land for another academy.

Question 193-198 (Chair) How much fraud has been identified in Academies?

As at 24 November, the Education Funding Agency (EFA) was aware of 35 cases of fraud in and against Academies in the two and a half years since it was established in April 2012. These are cases where on balance it is suspected that there was deliberate intent to deceive in order to disadvantage, or gain an unfair advantage over, another.

These 35 cases have an estimated cumulative value of £ 5.643 million. This estimate is based on cases identified by the EFA, referred to the EFA for investigation, or self-reported by Academies. These cases include instances where the academy is the victim of a fraud committed by a third party, such as mandate fraud. The Academies Financial Handbook stipulates that academies must notify the EFA if they incur losses through fraud in excess of £5,000.

£3.167 million of the total estimated value comes from two self-reported cases: Haberdashers’ Aske's (£1.962 million) and St Aldhelm's Academy (£1.205 million).

Notes:

• Reference was made in the hearing to an estimated £80,000 loss recovered from Kings Science Academy. This relates to £86,000 of fraudulent and irregular expenditure at this academy. The EFA has recovered the £86,000 in full; £8,000 of this £86,000 related to fraud.

• The estimated cumulative value of £5.643 million includes the total value of fraud for Haberdashers’ Aske’s included in the trust’s accounts to date (£1.962 million). 

• An investigation instigated by the Haberdashers’ Aske’s Federation Trust found that the fraud had taken place over a number of years prior to 2012 and estimated the full value of the loss at £4.041 million.  

• The estimate of total fraud includes £113,000 for the Priory Federation of Academies Trust. The audit report on this case was completed in March 2012 but work was ongoing in April 2012 onwards.

Chris Wormald

Permanent Secretary

Department for Education

9 December 2014

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